BETHLEHEM, South Africa, May 2 (Reuters) - After a decade of living in a tiny corrugated iron shack, Nyani Moloi was ecstatic when she was handed the keys to a two-bedroom brick house built by the government.

But the unemployed grandmother’s joy quickly turned to anger when she discovered the home has no running water or electricity; the toilet does not flush, and rain seeps through the walls.

“I am heartbroken by the condition of the house,” Moloi, 59, told Reuters as she pointed out damp patches in the home she shares with four grandchildren in the town of Bethlehem in Free State province.

The squalid conditions in a 150 million rand ($10 million) housing project known as Baken Park highlight how efforts by the governing African National Congress (ANC) to address persistent racial disparities in housing, land ownership and services have faltered, a generation after white minority rule ended in 1994.

It is an issue that could dent support for Africa’s oldest liberation party in elections next week for parliament and provincial legislatures, a vote that will determine the country’s next president.

President Cyril Ramaphosa, who took office last year, has promised to accelerate land redistribution, improve service delivery and build a million houses over five years.

Political analysts say an ANC victory is all-but assured, but the party has been struggling to reverse dwindling support blamed in part on unfulfilled promises to improve the lives of millions of South Africa’s poorest people.

PUBLIC ANGER

In a number of townships across the country, residents have taken to the streets in recent months to demand land, houses, sanitation infrastructure, water and electricity.

Public anger has been aggravated by perceptions that some government officials and their business allies are growing rich from corruption.

A spokesman for the police’s elite “Hawks” unit said it was investigating allegations of tender irregularities in a number of municipal housing and other improvement projects but did not provide details.

ANC spokesman Dakota Legoete said the party was determined to root out corruption and had taken steps including setting up judicial enquiries.

But the party faces a potentially even more formidable challenge: South Africa’s economy has barely grown over the past decade and government revenue has come in below target in recent years, hampering the state’s efforts to address an array of social needs.

Housing projects like the one in Bethlehem must compete for resources with initiatives such as free education and social grants for millions of poor South Africans.

During the election campaign, Ramaphosa visited a township located within sight of South Africa’s main financial district where many people still live in shacks and sewage pools in the streets. Residents there had been staging protests for weeks over the poor conditions.

“Your message is very clear,” Ramaphosa told a packed stadium in the Johannesburg township of Alexandra. “We cannot allow our people to live among the filth that I have seen.”

Such assurances are not enough to persuade some voters, though. In Baken Park, Moloi, 59, doubts she would cast a ballot for the ANC again.

Two years after moving into her home, she is still without running water or electricity. Legally, she doesn’t own the house or the land it stands on: she has yet to receive a title deed for the property.

“When it comes to elections, they come and tell us everything and anything so that we can vote for them, but they do nothing for us,” Moloi said of the ANC’s candidates.

BROKEN PROMISES

The ANC won the loyalty of millions for helping to deliver an end to decades of oppressive white rule, during which members of the black majority were forced into crowded urban townships and impoverished rural reserves with minimal public services.

But for many of those dispossessed under apartheid, the establishment of a vibrant all-race democracy has not translated into broad improvements in their living conditions.

Estimates vary, but the consensus is that most privately owned land remains in white hands making it a potent symbol of wider economic disparities.

The Baken Park housing project is part of a Reconstruction and Development Programme (RDP) introduced by the ANC in 1994 to alleviate poverty and inequality, including by providing subsidised houses to families earning less than 3,500 rand per month.

Over the past 25 years, the government has provided more than 4.7 million homes to the elderly and the poor, according to the national Department of Human Settlements. But officials say demand has outstripped supply due to rapid urbanisation, resulting in a shortage of 2.1 million homes.

BROKEN PROMISES

Moloi, a widowed mother of four, lived most of her life in rural parts of the province before relocating to a shanty town near Bethlehem in 2007 to be closer to job opportunities.

She thought life would be easier when she moved into a home with modern conveniences such as a toilet and kitchen, but said it hadn’t changed much.

“I cook with a gas stove because there is no electricity,” she said. “I cook with it outside. When the rain pours outside, I get drenched in water.”

The housing project lies about 4 km (2.5 miles) from Bethlehem’s town centre, which has upmarket suburbs that were once exclusively for white people but have since opened up to all who can afford to buy property there.

From a distance, the rows of brick homes look like a big improvement over the nearby shanty town known as Captain Charles, where Moloi used to live. Residents there said about 100 households share four pit toilets and a single water tap.

With no functioning sewage system, Maloi must use a water bucket to flush her toilet. Some of her neighbours prefer to dig pit latrines.

Residents said authorities assured them that water and electricity would be provided to the homes within two or three months of occupation, but nothing happened.

A spokeswoman for the Free State’s human settlements department, Senne Bogatsu, said authorities recognised that “not all basic services could be completed in time”.

A new contractor has been hired to rectify the problems and taps installed outside homes as a temporary measure, she said.

Construction on the project, which began in 2013, continues with 843 houses out of a target of 1,000 built so far, Bogatsu said. (Reporting by Olivia Kumwenda-Mtambo in Bethlehem and Nqobile Dludla in Johannesburg Additional reporting by Alexander Winning in Johannesburg Editing by James Macharia, Alexandra Zavis and Giles Elgood)